Mortgage Assistance Program for Homeowners September 8, 2009

With the latest news from public records on the government controlling 86% of all new home loans, we’ll re-visit our Mortgage Assistance Program created months ago to prevent foreclosure. There is worry that a significant amount of these new home loans guaranteed by FHA will default, causing a second decline in the housing market. With a minimum 3.5% down on these loans, the assisting $8,000 tax-credit provides new homeowners a cushion to purchase. But as the expiration date on this tax-credit approaches, the market is leery on the aftermath of its removal. The plan that we have presented has a reduced mortgage payment for a time period (covered by the government) until the borrower can afford to pay more. This short-term assistance would be beneficial to homeowners soon to default. Here is an excerpt from the plan:

Under President Obama’s new approach, property owners should not be removed from a home, but permitted to stay and pay rent. If someone can pay rent, than that same person can pay a mortgage payment if structured correctly. The government is providing $8,000 for first time buyers, so why can’t the government pay part of the payment and have the borrower repay the government in the future??

Instead of a rental payment, let the homeowner make the payment toward the mortgage and the government can cover the difference in a mortgage assistance program which will be repaid over time. Here is an example of how it could work.

• Mr. and Mrs. Z have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).

• The Z’s lose their job and can only pay $470, so the government pays the difference of $700

• The Z’s remain homeowners and work through their problem. It takes the Z’s 10 months to get back on their feet, the government paid out $7,000 and now the Z’s owe the government.

• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.

What the government provides is assistance to the property owner (just like the bailout plans for the Financial Industry and Automotive Industry) and requires them to pay back the obligation starting in seven years. This is not a freebie, but short term assistance. Franklin Roosevelt called it Lend Lease.

See the benefits, implementation and the obstacles of the program HERE:

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